Performance exceeded expectations as demand trajectory outpaced normal seasonal levels against a backdrop of improving production costs

STAMFORD, Conn., May 1, 2024 /PRNewswire/ — Tronox Holdings plc (NYSE:TROX) (“Tronox” or the “Company”), the world’s leading integrated manufacturer of titanium dioxide (“TiO₂“) pigment, today reported its financial results for the quarter ending March 31, 2024, as follows:

First Quarter 2024 Financial Highlights:

• Produced revenue of $774 million, a 13% increase compared to the prior quarter, or a 9% increase compared to the prior year
• Generated income from operations of $41 million, and a net loss of $9 million; adjusted net loss was $7 million (non-GAAP)
• GAAP diluted loss per share of $0.06; Adjusted diluted loss per share was $0.05 (non-GAAP)
• Delivered Adjusted EBITDA of $131 million, exceeding previously issued guidance of $100-120 million, and an Adjusted EBITDA margin of 16.9%, slightly above the guided range (non-GAAP)
• Invested $76 million in capital expenditures in the quarter 

Second Quarter 2024 Outlook:

• TiO₂ volumes expected to increase 7-10% compared to Q1 2024
• Zircon volumes expected to be relatively flat compared to Q1 2024
• Adjusted EBITDA expected to be $160-180 million and Adjusted EBITDA margin to be in the range of 20%

This outlook is based on Tronox’s views on current global economic activity and is subject to changes and impacts associated with the macroeconomic conditions, global supply chain, and inflation-related challenges, among others.

 

CEO’s Remarks and Outlook
Chief Executive Officer John D. Romano commented, “As we stated in the release of our preliminary first quarter results, Tronox delivered a stronger first quarter than anticipated. This was driven by lower production costs across our operations, destocking having largely run its course through the supply chain paired with demand trajectory outpacing normal seasonal levels, and our ability to respond to that demand through the strength of our global footprint. Our revenue increased 13% compared to the prior quarter, or 20% on TiO₂ and zircon revenue alone, excluding other product sales which saw a decrease due to non-repeating sales of ilmenite and a portion of our rare earth tailings deposit in South Africa. The 18% increase in TiO₂ volumes from the fourth quarter exceeded the growth that would be more typical for this time of year. However, this type of rebound is indicative of what we would expect to see on the front end of a recovery. Demand improved across all regions, and outperformed even more so in Europe, Middle East, Africa and Latin America where volumes declined more significantly over the past six quarters. Zircon continued to recover from the trough volumes seen in July 2023, driven by strong underlying demand, despite the market in China remaining fairly muted. Pricing for both TiO₂ and zircon was in line with our expectations. 

“On the operational side, we incurred significant costs in 2023 from running our assets at low utilization rates due to soft underlying demand. As we saw the market start to turn late last year, we began increasing our operating rates. As a result, our first quarter manufacturing costs improved when compared to both the prior year and prior quarter. As the high-cost inventory continues to move through our internal supply chain, efficiencies from investments made in the business to reduce costs will enable margins to return to levels realized prior to the downturn. The first quarter has been a true inflection point, and we believe the trends on both the market side and in reducing our costs will continue going forward. We are well on our way to delivering a step change in earnings power, having already worked through much of the remaining high cost inventory on the balance sheet.”

Mr. Romano concluded, “As we look ahead to the second quarter, we expect TiO₂ volumes to increase 7-10% and zircon volumes to be relatively flat, both compared to Q1 2024. As our production costs continue to decline from peak 2023 levels, we expect to see further improvements in absorption and non-repeating charges in the second quarter. As a result, we expect Adjusted EBITDA for the second quarter to be $160-180 million and our Adjusted EBITDA margin to be in the range of 20%.”

First Quarter 2024 Results
(Comparisons are to prior year (Q1 2024 vs. Q1 2023) unless otherwise noted)

The Company recorded first quarter revenue of $774 million, an increase of 9% primarily driven by higher TiO₂ and zircon volumes, partially offset by lower pricing. 

Revenue from TiO₂ sales was $605 million, an increase of 8% driven by an 18% increase in volumes, partially offset by a 10% decrease in average selling prices including mix. Sequentially, TiO₂ sales increased 17%, driven by an 18% increase in sales volumes, partially offset by a 1% decrease in average selling prices including mix.

Zircon revenue increased 22% to $88 million, driven by a 43% increase in volumes, partially offset by a 21% decrease in average selling prices. Sequentially, zircon revenue increased 54%, driven by increased volumes, while pricing was level to the fourth quarter. 

Revenue from other products was $81 million, an increase of 7% year-over-year. Sequentially, revenue from other products decreased 26%, primarily due to the opportunistic sales of ilmenite and a portion of a rare earths tailings deposit in South Africa that occurred in the fourth quarter and did not repeat, as expected and communicated last quarter.  

Net loss attributable to Tronox in the quarter was $9 million, or $0.06 per diluted share, compared to net income attributable to Tronox of $23 million, or earnings of $0.15 per diluted share in the year-ago period. Adjusted net loss attributable to Tronox (non-GAAP) was $7 million, or $0.05 per diluted share. 

Adjusted EBITDA of $131 million represented a 10% decrease, driven by headwinds from product pricing and mix impacts and other company costs; this was partially offset by tailwinds from higher sales volumes, improved absorption from higher production volumes, exchange rates and lower freight costs. Adjusted EBITDA margin was 16.9%.

Sequentially, Adjusted EBITDA increased 39% due to improved absorption from higher production volumes, the absence of non-repeating charges in the prior quarter and higher sales volumes; this was partially offset by headwinds from product pricing and mix impacts, other company costs, exchange rates and higher freight costs due to Red Sea challenges. 

The Company’s selling, general and administrative expenses were $79 million for the quarter, an increase of 11%. Tronox’s net interest expense in the quarter was $38 million. Depreciation, depletion and amortization expense was $72 million.

Balance Sheet, Cash Flow and Capital Allocation
Tronox ended the quarter with $2.8 billion of total debt, $2.7 billion of net debt and a net leverage ratio of 5.2x on a trailing twelve-month basis. Available liquidity at the end of the quarter totaled $629 million, including $152 million in cash and cash equivalents and $477 million available under our revolving credit agreements. There are no significant debt maturities until 2028 and no financial covenants on the Company’s term loans or bonds. 

Free cash flow for the quarter was a use of $105 million, primarily due to higher working capital needs including higher accounts receivable driven by improved sales, which were partially offset by lower inventories. Accounts payable also decreased in the quarter. Capital expenditures were $76 million, including investments in the Company’s key capital projects to extend existing mines reaching their end of life and sustain the Company’s vertical integration benefit. The Company declared a dividend of $0.50 per share on an annualized basis for the first quarter that was paid in the second quarter.

Sustainability
Tronox officially began receiving power from the 200MW solar project in South Africa, which will reduce the Company’s Scope 1 and Scope 2 carbon emissions intensity by 13% globally. This is a significant step on the Company’s journey to “net zero” by 2050, a commitment Tronox will maintain in its 2023 Sustainability Report, expected to be published in the second quarter. The report will also outline a number of key initiatives across emissions and waste reduction, water management, social initiatives and more.